Shift toward urban lifestyles forecast to 2030

In April 2011, Arthur C. Nelson startled a gathering of journalists at the Lincoln Institute of Land Policy by predicting that this entire decade would end up as a calamity for homebuilders. Builders had begun suffering by 2007 during the lead-up to the housing crash, but Nelson emphasized that the difficulties from 2007 to early 2011 were only the beginning—the pain would continue all the way to 2020, thanks to a confluence of important demographic and economic forces.

Now Nelson, a professor of city and metropolitan planning at the University of Utah, has written a book that elaborates on his forecast and extends it through 2030. His conclusion: Conventional residential development in the outer suburbs will remain troubled throughout this period, while by contrast, compact, walkable, transit-oriented development—much of it in close-in suburbs—will be in great demand.

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The market, Nelson asserts, has radically changed, in ways that will make it difficult for detached houses on large lots at the metropolitan fringe to gain in value. The nation is in the process of turning away from sprawl. Homeownership rates in 2020 and 2030 will be lower than those in 2000 and 2010.

The chief reasons for these shifts:

• Gasoline could cost $8 a gallon by 2020, and it may shoot up to $15 by 2030. These figures are predicated on gasoline prices continuing to rise as they did from 2002 to 2012—roughly 10 percent per year compounded, or three times faster than inflation in the overall economy.

• Both the income and the accumulated wealth of the median household are falling. In the 1980s the top fifth of US households possessed 80 percent of the nation’s wealth, but by 2010 the top 20 percent had 99 percent of the wealth, reducing the size of the for-sale housing market.

• Unemployment will remain higher than it was during the long postwar boom.

• Institutional support for home-ownership is waning—evidenced by higher credit-score standards, higher downpayment requirements, and the tightening of other mortgage underwriting standards. This will crimp the ability of Americans to buy houses.

Taken together, these trends will impel many Americans to live more thriftily—at higher densities, in more walkable neighborhoods, closer to jobs, services, and public transit. Reshaping Metropolitan America predicts that from 2010 to 2030, 74 percent of new housing demand will be for small homes on smaller lots than were the norm in the previous two decades. Attached housing and rentals will proliferate. Boomers will be unloading their large detached houses. 

Choice of location will become more constrained. “There may be little or no demand for homes in exurban or suburban fringe areas of slow-growing or stagnating metropolitan areas,” he suggests. For homebuyers, Nelson says, the bottom line is that “values will be preserved and possibly enhanced only by purchasing homes in closer-in urban and suburban locations.”

Opportunity beckons

Given the economic distress that Nelson sees as a persistent element in our future, I was surprised by the large volume of development he forecasts. More than 30 million new or replaced residential units, he says, will be created between 2010 and 2030. That’s equal to about a quarter of all the housing that existed in 2010. Why so much? There are two main reasons: First, the US will grow by 65 million people, or 21 percent. Second, recent surveys show that “about half of Americans want to live in walkable communities with mixed housing and other mixed uses.”

Nelson says a monumental shift in housing preferences, already under way among baby-boomers (born 1946-1964) and Gen Y (born 1981-1995), could allow much of the coming development to take a relatively compact form. “Rising energy prices and increasing congestion will increase the demand for locations and real estate developments that offer live-work options, less driving, or enhanced opportunities to work at home.”

Much of this urban-style redevelopment will take place in the suburbs, where cheaply built stores and large parking lots present attractive development opportunities, he says. “Multifamily development demand will focus around public transit stations and near suburban centers. Over time, single-use commercial strips will be turned into mixed-use corridors.”

More of the country’s households will contain multiple generations. Average household size dropped for more than a century, but the decline seems to have ended recently, and it may start to reverse. Extrapolating from trends recorded between 1980 and 2010, Nelson says that “about 20 percent of Americans will be in multigenerational households by 2030.” The number could be even higher—closer to household composition in 1900, when approximately 24 percent of dwellings were occupied by multiple generations.

The chief vulnerability of Reshaping Metropolitan America is that its forecast depends heavily on trends that aren’t guaranteed to continue. If energy were to become cheaper and more abundant, or if cities were to become as angry and dangerous as they were 40 years ago, or if popular preferences were to shift in unanticipated ways, Nelson’s predictions could be thrown off. Nonetheless, his forecast seems well-supported by current economic and demographic facts.

From the perspective of New Urbanism and smart growth, the biggest concern is whether the US will be able to seize the huge, emerging opportunities. By Nelson’s calculations, about 10 million households now have the option of living in “mixed-use, amenity-rich, transit-accessible” locations. By 2030, fully a quarter to a third of the nation’s 143 million households will want those options. To meet the explosion of demand, the supply of housing in walkable, mixed-use settings will have to grow by at least 25 million units—in less than two decades.

That’s a tall order. “For the most part, planners and public decision makers do not comprehend the magnitude of changes that will occur in the housing market to 2030,” Nelson warns. “By the time market realities become evident, many options may have been foreclosed.”

The challenge, then, is to rapidly start framing and implementing strategies that can address the coming needs. Parking standards will have to be altered. Local governments should authorize accessory dwelling units. Infill development and conversion to new uses will require favorable municipal policies. Zoning in many places will have to be reformed. Infrastructure improvements—roads, sidewalks, transit, parks—will be needed.

Reshaping America Index

To propel progress, Nelson has devised the Reshape America Index (RAI), which estimates how much additional residential and nonresidential space will be needed in various parts of the nation. The Index is based on the idea that many existing residential and nonresidential buildings will have to be razed and replaced by denser (and in many instances mixed-use) development.

“Given the vastness of [current] low-density suburban development, the RAI assumes that the average land-use intensity of existing metropolitan-wide development can be doubled without triggering major design solutions for parking and access,” Nelson explains. The book contains a table showing how much new construction will be needed in the nation’s nine Census divisions.

With supportive governmental policies, all but two of those Census divisions—the South Atlantic and West South Central—could accommodate the needed housing and nonresidential development without consuming any farms, forests, or other natural terrain, he maintains. A more detailed breakdown, which adapts figures from Woods & Poole Economics, shows the redevelopment potential of 124 Combined Statistical Areas, 365 Metropolitan Statistical Areas, and 575 Micropolitan Statistical Areas. The detailed study is not in the book but can be downloaded at www.ReshapeMetroAmerica.org.

If the Index spurs governments to take action, it will have performed an important service. Certainly the book as a whole is a boon to intelligent and efficient development. Nelson has a keen eye for trends and possibilities. The kinds of development he favors are what this country should be working toward.

Reshaping Metropolitan America: Development Trends and Opportunities to 2030, by Arthur C. Nelson, is published by Island Press, 2013, 168 pp., $70 hardcover, $35 paperback.

Philip Langdon’s latest book is The Private Oasis: The Landscape Architecture and Gardens of Edmund Hollander Design.